E-FILED 5/15/ UN-80

Transcription

1 1 DIRECT TESTIMONY E-FILED 5/15/ UN-80 2 OF 3 SAMUEL G. SUMNER, JR. 4 On Behalf of 5 MISSISSIPPI POWER COMPANY 6 BEFORE THE MISSISSIPPI PUBLIC SERVICE COMMISSION 7 DOCKET NO UN- 8 9 Q. Would you please state your name, position and business address? 10 A. My name is Samuel G. Sumner, Jr. I am the Project Asset Manager, Kemper 11 County IGGC Plant (Plant) for Mississippi Power Company (MPC or the 12 Company). My business address is 2992 West Beach Boulevard, Gulfport, 13 Mississippi Q. Please describe your education and professional experience. 15 A. I received my degree in Mechanical Engineering from the University of Alabama 16 Birmingham in I have been an employee of the Southern Company for a 17 cumulative eighteen years and have served in a variety of positions of increasing 18 responsibilities in the areas of plant engineering, plant management, finance and 19 enterprise asset management. From , I was an engineering co- 20 operative education student at Alabama Power Company plants Gorgas and 21 Miller. From , I was a field engineer, project manager and Six Sigma 22 manager for GE Power Systems executing gas and steam turbine construction, 23 startup and maintenance projects. From , I was the maintenance Page 1 of 11

2 1 manager at Georgia Power Plant Bowen. In 2003, I was assistant to the Chief 2 Production Officer for Southern Company. In 2004, I was a financial manager in 3 Southern Company Finance. From , I was plant manager at 4 Mississippi Power for plants Watson, Eaton and Sweatt. From , I 5 was the project director for the implementation of the enterprise asset 6 management and financial systems for Southern Company. From October of through March 2015, I was the plant manager for the Kemper Plant. The 8 plant includes the lignite delivery, gasification, gas clean up, combined cycle and 9 associated balance of plant processes. 10 Q. What is the purpose of your testimony? 11 A. My testimony will describe the proposed operation plan for the Kemper Plant and 12 provide a summary of the non-fuel operation and maintenance (O&M) expense 13 and maintenance capital estimates contained within the traditional, rate mitigation 14 plan (RMP) 2017 and RMP 2019 plans as described in the direct testimony of Mr. 15 Feagin. The estimates provided in my testimony are totals and are not reduced to 16 reflect the allocation to SMEPA or the wholesale jurisdiction. The allocations of 17 these O&M estimates to the retail jurisdiction are contained in Mr. Feagin's 18 testimony. 19 Q. Do you sponsor any exhibits with your testimony? 20 A. Yes. I am sponsoring four exhibits: 21 Exhibit (SGS-1) Plant Staffing Exhibit (SGS-2) Plant Projected O&M Expense and Maintenance 24 Capital Estimates 25 Exhibit (SGS-3) Projected Availability Ramp Page 2 of 11

3 l 2 Exhibit (SGS-4) Chemical Product Revenue Projections 3 4 Q. Were these exhibits prepared under your supervision and control? 5 A. Yes. 6 Q. Please provide a brief description of the operational characteristics of the 7 Kemper Plant. 8 A. The Kemper Plant will be fueled with Mississippi lignite which is surface mined 9 at the mine site adjacent to the Plant. The lignite will be delivered to the Plant 10 over conveyors, through crushers, into silos, and then into dryers where the lignite 11 is dried to approximately one-half of its original moisture content. The lignite is 12 then pulverized and fed into the gasifier. Inside the gasifier, a chemical process 13 Similar to fluid catalytic cracking heats the lignite and produces the syngas. 14 After the syngas is cooled, it goes through the processes necessary to 15 remove particulates, sulfur, nitrogen oxides (NOx), carbon dioxide (CO2) and 16 mercury contained in the syngas. During the process of cleaning the syngas, 17 marketable sulfuric acid and ammonia products are produced, transported and 18 sold. The captured CO2 ÏS COmpressed, delivered and sold to the off-takers for 19 sequestration via an enhanced oil recovery process. 20 The cleaned syngas is then used to fuel a combined cycle generating plant 21 similar to Plant Daniel Units 3 and 4. This combined cycle configuration consists 22 of two gas turbines (GTs) with associated generators, two heat recovery steam 23 generators (HRSG) and a single steam turbine generator. The syngas powers the 24 two GTs and the gas turbine exhaust provides heat to the HRSGs to produce Page 3 of 11

4 1 steam that is then supplemented with steam from the gasification systems to drive 2 the steam turbine. The combined net output of the three generators is delivered to 3 the electrical grid. 4 The Plant is a zero liquid discharge facility-no process water will be 5 discharged into any rivers or streams. Process wastewater streams will be treated 6 and evaporated by the cooling towers. To provide makeup supply water to the 7 cooling system to replace water lost through evaporation, reclaimed treated 8 municipal wastewater from two publicly owned treatment works in Meridian, 9 Mississippi, will be used. This treated effluent will be transported to the site via 10 pipeline from a dedicated pumping station located at the Meridian treatment 11 facility. Because the flow of reclaimed water from the Meridian facility varies 12 seasonally and to provide for weather related events, MPC has constructed an 13 approximately 1,500 acre-foot pond on the plant site to manage the supply of 14 makeup water. 15 Q. How was MPC's overall O&M strategy for the Kemper Plant developed? 16 A. MPC and Southern Company have extensive experience in operating, maintaining 17 and optimizing electric generating facilities. MPC has leveraged this experience 18 and knowledge in developing the overall O&M strategy for the Plant. Given that 19 a significant portion of the Plant consists of chemical processes and equipment, 20 existing and well-developed best practices from the chemical industry have also 21 been used to develop the overall Kemper Plant O&M plan. 22 Southern Company Generation has a set of best practices designed to provide 23 consistent management for all aspects of power plant safety, operations, Page 4 of 11

5 1 maintenance, engineering, compliance and support. All applicable O&M 2 Southem Company guidelines are implemented in the Kemper Plant strategy to 3 ensure consistency with current Southem Company best practices and to take 4 advantage of economies of scale efficiencies. The scope of the O&M strategy 5 includes operations, staffing, outsourcing of key plant activities and maintenance 6 plans. The Plant O&M strategy was supplemented by visiting and discussing this 7 strategy in great detail with several petro-chemical refinery facilities, one 8 operating IGCC plant, the Southem Company Power Systems Development 9 Facility (PSDF) where the TRIGTM technology was developed and demonstrated, 10 Southem Company Gasification Technology personnel, outside chemical 11 consultants and several Southem Company combined cycle and fossil plants. 12 The O&M plans for the combined cycle process and the plant support staff 13 were developed from visits and discussions with existing Southem Company 14 plants. The Southem Company Generation staffing organization model was 15 implemented as applicable to the TRIGTM technology in the areas of safety, 16 compliance & support, maintenance, planning and engineering. The results of 17 these meetings and visits are the basis upon which the final combined cycle and 18 plant support O&M plans were developed. 19 Q. Has MPC contracted with third-parties to operate any portion of the 20 Kemper Plant? 21 A. Yes. Consistent with MPC's existing management and operation philosophy, 22 smaller ancillary and support activities are expected to be contracted out to 23 various third-parties when appropriate. Examples would include HVAC Page 5 of 11

6 1 maintenance, pipeline operations and maintenance, ash hauling, grounds keeping 2 and janitorialservices. 3 Based on the visits to the petro-chemical refinery facilities and power 4 plants, MPC has also contracted with third-party experts to be the primary 5 operator of certain processes. This strategy will allow MPC to concentrate on 6 optimizing the IGCC process of the Kemper Plant in the first several years of 7 operation. MPC has also solicited advice from several original equipment 8 manufacturers in the development of the Kemper Plant O&M plan. For example, 9 for the Siemens GTs and generators, MPC has executed a long-term parts and 10 services contract, similar to our long-term service agreement for Plant Daniel that 11 will govern the O&M plan for these critical assets in the combined cycle island. 12 Southern Company has considerable experience with water plant O&M, 13 but limited experience with operating a waste water plant. A decision was made 14 to entertain a proposal from Aquatech International Corp. (Aquatech) to evaluate 15 the viability of an outsourcing strategy. Upon analyzing the proposal, MPC 16 determined that O&M services from a third-party would be comparable in cost to 17 a self-perform option. Therefore, a decision was made to have Aquatech operate 18 and maintain the water treatment and wastewater systems located at the Kemper 19 Plant. An operations contract has already been executed with Aquatech. 20 MPC sold the air separation unit (ASU) to Air Liquide Large Industries 21 U.S. LP (Air Liquide). The ASU produces nitrogen which is a key input to the 22 TRIGTM IGCC process. MPC has executed a long term contract with Air Liquide Page 6 of 11

7 1 to provide all the nitrogen needs for the plant in a product service and supply 2 agreement. 3 Q. What is the O&M responsibility of MPC with respect to the lignite mine and 4 linear facilities? 5 A. The lignite mine is owned by MPC, but will be operated by Liberty Fuels, LLC, a 6 subsidiary of North American Coal. Pursuant to the lignite mining agreement 7 between MPC and Liberty Fuels, Liberty Fuels is responsible for mining and 8 transporting the lignite to one of three specified storage areas on the Kemper Plant 9 site. Liberty Fuels will also operate the lignite delivery facility (LDF) up to the 10 tripper floor. Liberty Fuels is responsible for maintaining all of the equipment 11 and facilities utilized at the lignite mine and all equipment in the LDF upstream to 12 the tripper floor. 13 MPC is the owner of the treated effluent pipeline up to the point of 14 interconnection between the pumping station and the Meridian wastewater 15 treatment facility. MPC is the owner of the CO2 pipeline from the plant site to the 16 designated metering points for the two off-takers. Finally, MPC is the owner of 17 the natural gas pipeline from the Plant site to the point of interconnect with the 18 Tennessee Gas Pipeline network. MPC is responsible for the operation and 19 maintenance of these pipeline facilities up to the various points of interconnect 20 described above. 21 Q. Please describe MPC's staffing plan for the Kemper Plant. 22 A. The Kemper Plant non-fuel O&M estimates assume an initial Company staffing 23 of 285 full time MPC positions in the traditional rate and RMP 2017 plans to Page 7 of 11

8 1 operate and maintain the Plant and related facilities subject to the scope of 2 responsibilities described above. The staffing plan for RMP 2019 was developed 3 in mid 2014 and consists of 220 full time MPC positions. Since the development 4 of the RMP 2019 staffing plan, major construction of the plant has been 5 completed. A detailed analysis of plant equipment and physical layout was 6 performed which resulted in the additional 65 positions in the traditional rate and 7 RMP 2017 plans. Exhibit (SGS-1) provides an staffing plan developed by 8 MPC for the management and operation of the Kemper Plant for all three plans. 9 The Kemper Plant organization will consist of the Plant Manager, 10 Assistant Plant Manager, Operations and Maintenace Manger and five primary 11 departments: (1) Environmental, Health & Safety; (2) Operations; (3) 12 Maintenance, Planning and Engineering; (4) Process Engineering & Controls; and 13 (5) Compliance and Support. The overall staffing level assumes contract 14 employees will perform the bulk of the work during scheduled maintenance. This 15 approach is consistent with MPC's maintenance strategy at all of its existing 16 generating plants. In addition, because the Plant consists of petro-chemical 17 processes and equipment, MPC's recruiting effort has focused on hiring personnel 18 with prior experience in the petro-chemical industry. 19 Q. What is MPC's outage strategy for the Kemper Plant? 20 A. The Plant's planned outage schedule will largely be dictated by the operating 21 hours of the GTs. Similar to MPC's existing fleet, the Plant's O&M estimates are 22 largely driven by the scope and schedule of planned outages. It is MPC's intent to 23 complete other equipment maintenance activities during the required GT outages. Page 8 of 11

9 1 After consultation with Siemens, MPC developed an expected planned 2 outage schedule for the entire Plant. MPC's outage strategy is also largely 3 dependent upon plant availability. The O&M estimates contained in my 4 testimony assume the availability ramp in Exhibit_(SGS-3). Therefore, 5 depending upon the extent to which the Kemper Plant availability deviates from 6 the currently assumed availability, the outage schedule may require revisions to 7 accommodate accelerations or delays in major maintenance activities. 8 Q. What other O&M cost and schedule drivers are unique to the Kemper Plant? 9 A. The Kemper Plant will use more catalysts, sorbents and solvents than is typical in 10 MPC's existing generating fleet. MPC's goal is to optimize the catalyst life by 11 balancing the performance of the catalyst with the outage cycle in order to 12 minimize both O&M cost and outage durations. 13 Q. Why has the plant availability ramp changed from the December certificate filing to the current view? 15 A. The availability ramp in the December 2009 certificate filing was based on the 16 initial reliability, availability, maintainability (RAM) analysis that was performed 17 utilizing the design "screening level" estimate that was available at that time. In a new plant availability ramp was developed based on the latest plant 19 detailed design and with considerations for actual operating experiences of several 20 other commercial gasification electricity producing plants. 21 Q. What are the Company's O&M estimates for the proposed three plans? 22 A. Exhibit (SGS-2) provides detailed O&M expense and capital maintenance 23 estimates for the traditional rate, RMP 2017 and RMP 2019 plans. As explained Page 9 of 11

10 1 earlier in my testimony, the estimates in Exhibit (SGS-2) represent the total 2 amount required to operate and maintain the Plant for the three plans. Mr. 3 Feagin's testimony explains the revenue requirements associated with these 4 estimates and the allocation of these costs to the retail jurisdiction. 5 Q. In your opinion, are the O&M estimates reasonable? 6 A. Yes. We have taken advantage of available expertise and knowledge in 7 developing the Kemper O&M estimates. These estimates reflect, to the greatest 8 extent possible, the current design and operational philosophy necessary to 9 operate the Kemper Plant. 10 Q. Please describe the chemical product sales agreements. 11 A. MPC executed carbon dioxide (CO2) off-take agreements with Denbury Onshore, 12 LLC, and Treetop Midstream Services, LLC, on March 4, 2011, and May 19, , respectively. Both agreements were provided to the Commission in Docket 14 No UA-0290, wherein MPC notified the Commission of the Company's 15 intent to own and construct the CO2 pipeline to be used to transport the captured 16 CO2 from the Kemper Plant to the off-takers for use in enhanced oil recovery 17 activities in Mississippi, which was subsequently approved by the Commission. 18 On April 26, 2012, MPC and Martin Product Sales, LLC (MPS) entered into a 19 contract in which MPS will market and sell the sulfuric acid produced at the 20 Kemper Plant, and on July 23, 2012, the same parties entered into a contract in 21 which MPS will market and sell the ammonia produced at the Kemper Plant. 22 Q. What chemical product revenues are included in the Company's three rate 23 plans? Page 10 of 11

11 1 A. All of the expected chemical product revenues generated during the duration of 2 the traditional rate, RMP 2017 and RMP 2019 plans are shown in 3 Exhibit (SGS-4). 4 Q. Does this conclude your testimony? 5 A. Yes, it does. Page 11 of 11

12 BEFORE THE MISSISSIPPI PUBLIC SERVICE COMMISSION MISSISSIPPI POWER COMPANY DOCKET NO. E C IN RE: NOTICE OF INTENT OF MISSISSIPPI POWER COMPANY FOR A CHANGE IN RATES SUPPORTED BY A CONVENTIONAL RATE FILING OR, IN THE ALTERNATIVE, BY A RATE MITIGATION PLAN IN CONNECTION WITH THE KEMPER COUNTY IGCC PROJECT AFFIDAVIT OF SAMUEL G. SUMNER, JR. PERSONALLY appeared before the undersigned officer authorized to administer oaths, Samuel G. Sumner, Jr., who being duly sworn, deposes and says; that the foregoing direct testimony was prepared by him or under his supervision; that said testimony was prepared for use as direct testimony on behalf of Mississippi Power Company in the captioned proceeding; that the facts stated therein are true to the best of his knowledge, information and belief; and that if asked the questions appearing therein, his answers, under oath, would be the same. This the day of May, Sworn to and subscribed before me this day of May, SAMUEL G. SUMNER, JR. Notary Public My Commission Expires:. Ÿ.' *.! NOTARY PUBUC : : IDNo.4542 '. i.,mycmssionegas

13 285 MPC Full Time Positions * Electronic Copy * MS Public Service Commission * 9/2/2018 * MS Public Service Commission * Electronic Copy* MISSISSIPPI POWER COMPANY EXHIBIT (SGS-1) KEMPER RATE MITIGATION FILING Page 1 of 2 Plant Staffing - Traditional & RMP 2017 Plans

14 220 MPC Full Time Positions * Electronic Copy * MS Public Service Commission * 9/2/2018 * MS Public Service Commission * Electronic Copy* MISSISSIPPI POWER COMPANY EXHIBIT (SGS-1) KEMPER RATE MITIGATION FILING Page 2 of 2 Plant Staffing Plan

15 opy* MISSISSIPPI POWER COMPANY EXHIBIT (SGS-2) KEMPER RATE MITIGATION FILING Page 1 of 3 Projected O&M Expenses and Maintenance Capital Estimates for the Kemper Plant (Total Company 100% Dollars including SMEPA. Annual budget shown.) Traditional O&M EXPENSE Staffing $ 37,861,312 $ 51,857,917 Training/Licensing $ 942,375 $ 976,195 3rd Party O&M $ 23,222,780 $ 31,456,189 Major Equipment Maintenance $ 6,433,000 $ 8,950,000 Environmental, Health & Safety $ 5,250,000 $ 7,100,000 Rolling Stock $ 254,745 $ 346,453 Consumables $ 1,114,688 $ 1,523,406 Utilities/Chemicals $ 2,839,193 $ 4,795,000 Miscellaneous Contract Services $ 2,048,500 $ 3,550,000 TOTAL PLANT O&M $ 79,966,592 $ 110,555,160 TEST PERIOD O&M $ 18,090,000 $ 108,940,000 MAINTENANCE CAPITAL Staffing $ 1,706,251 $ 3,225,000 3rd Party Agreements $ 4,377,634 $ 629,320 Major Equipment Maintenance $ 6,659,361 $ 13,765,692 Environmental, Health & Safety $ 2,925,000 $ 2,175,000 TOTAL PLANT CAPITAL $ 15,668,246 $ 19,795,012 TEST PERIOD CAPITAL $ 2,610,330 $ 17,290,451

16 opy* MISSISSIPPI POWER COMPANY EXHIBIT (SGS-2) KEMPER RATE MITIGATION FILING Page 2 of 3 Projected O&M Expenses and Maintenance Capital Estimates for the Kemper Plant (Total Company 100% Dollars including SMEPA. Annual budget shown.) RMP2017 O&M EXPENSE Staffing $ 37,861,312 $ 51,857,918 Training/Licensing $ 942,375 $ 976,195 3rd Party O&M $ 22,082,950 $ 29,709,189 Major Equipment Maintenance $ 6,433,000 $ 8,950,000 Environmental, Health & Safety $ 5,250,000 $ 7,100,000 Rolling Stock $ 254,745 $ 346,453 Consumables $ 1,114,688 $ 1,523,406 Utilities/Chemicals $ 2,839,193 $ 4,795,000 Miscellaneous Contract Services $ 2,048,500 $ 3,550,000 TOTAL PLANT O&M $ 78,826,762 $ 108,808,161 TEST PERIOD O&M $ 17,845,000 $ 107,317,000 MAINTENANCE CAPITAL Staffing $ 1,706,251 $ 3,225,000 3rd Party Agreements $ 4,377,634 $ 629,320 Major Equipment Maintenance $ 6,659,361 $ 13,765,692 Environmental, Health & Safety $ 2,925,000 $ 2,175,000 TOTAL PLANT CAPITAL $ 15,668,246 $ 19,795,012 TEST PERIOD CAPITAL $ 2,610,330 $ 17,290,451

17 opy* MISSISSIPPI POWER COMPANY EXHIBIT (SGS-2) KEMPER RATE MITIGATION FILING Page 3 of 3 Projected O&M Expenses and Maintenance Capital Estimates for the Kemper Plant (Total Company 100% Dollars including SMEPA. Annual budget shown.) RMP2019 O&M EXPENSE Staffing $ 25,328,045 $ 38,195,102 $ 38,726,496 $ 39,835,090 Training/Licensing $ 95,766 $ 1,256,500 $ 976,195 $ 996,481 3rd Party O&M $ 23,656,552 $ 29,860,872 $ 30,100,263 $ 31,255,404 Major Equipment Maintenance $ 4,275,563 $ 8,044,000 $ 8,850,000 $ 9,910,000 Environmental, Health & Safety $ 6,131,250 $ 6,775,000 $ 6,100,500 $ 6,233,760 Rolling Stock $ 249,750 $ 339,660 $ 346,453 $ 353,382 Consumables $ 1,087,500 $ 1,486,250 $ 1,523,406 $ 1,562,627 Utilities/Chemicals $ 2,208,612 $ 3,785,590 $ 4,795,000 $ 4,325,000 Miscellaneous Contract Services $ 768,032 $ 2,488,000 $ 3,550,000 $ 3,850,000 TOTAL PLANT O&M $ 63,801,068 $ 92,230,974 $ 94,968,314 $ 98,321,744 MAINTENANCE CAPITAL Staffing $ 1,706,251 $ 3,225,000 $ 1,525,000 $ 2,600,000 3rd Party Agreements $ 4,377,634 $ 629,320 $ 4,968,046 $ 14,567,256 Major Equipment Maintenance $ 6,659,361 $ 13,765,692 $ 38,782,291 $ 28,489,018 Catalyst Replacement $ 9,169,560 Environmental, Health & Safety $ 2,925,000 $ 2,175,000 $ 2,000,000 $ 1,750,000 TOTAL PLANT CAPITAL $ 15,668,246 $ 19,795,012 $ 47,275,337 $ 56,575,834

18 MISSISSIPPI POWER COMPANY EXHIBIT (SGS-3) KEMPER RATE MITIGATION FILING Page 1 of 1 Projected Availability Ramp 90% 80% 71% 78% 70% 60% 54% 50% 40% 35% 30% 20% 10% 0% * Electronic Copy * MS Public Service Commission * 9/2/2018 * MS Public Service Commission * Electronic Copy*

19 opy* MISSISSIPPI POWER COMPANY EXHIBIT (SGS-4) KEMPER RATE MITIGATION FILING Page 1 of 3 Summary of Estimated Chemical Product Revenues Total Company 100% Dollars including SMEPA (millions) $60 $50 $40 $30 $20 $10 $ Test Period /2017 Test Period 2 - Traditional $7 $49

20 opy* MISSISSIPPI POWER COMPANY EXHIBIT (SGS-4) KEMPER RATE MITIGATION FILING Page 2 of 3 Summary of Estimated Chemical Product Revenues Total Company 100% Dollars including SMEPA (millions) $60 $50 $40 $30 $20 $ Test Period /2017 Test Period 2 RMP 2017 Product Revenue $7 $49

21 opy* MISSISSIPPI POWER COMPANY EXHIBIT (SGS-4) KEMPER RATE MITIGATION FILING Page 3 of 3 $90 $80 $70 $60 $50 $40 $30 $20 $10 Summary of Estimated Annual Chemical Product Revenues Total Company 100% Dollars including SMEPA (millions) $ RMP 2019 $31 $60 $73 $79